Maximal Fines and Corruption: An Experimental Study on Illegal Waste Disposal

Corruption is known to be one of the real life situations which may jeopardize the effectiveness of fines in deterring crime. We present a model of ‘crime with corruption’ by which both the dilution of crime deterrence due to corruption, as well as the possibility of crime encouraging fines are formally highlighted. More importantly, by running an experiment on a subject pool of students for the case of illegal waste disposal, we provide experimental evidence on the validity of our theoretical predictions. We find that increasing fine rate may become crime encouraging or at least ineffective, beyond a context-specific fine threshold. In a policy perspective, we suggest that the optimal design of a crime-deterring sanctioning system must simultaneously account for both corruption practices and anti-corruption policies.